News

TTIP Clause Claimed to Encourage Tax Evasion

17.02.2016 -

A controversial clause in the proposed treaty for a Transatlantic Trade and Investment Partnership (TTIP) between Europe and the US that would allow multinational corporations to effectively sue governments for taking actions that might damage their business could also be used to fight taxation, an analysis by UK organizations Transnational Institute and Global Justice Now has warned.

The organizations whose declared purpose is to lobby for social justice said data and documents from “hundreds of past investor state dispute settlement (ISDS) tribunal cases” in other trade agreements prove that 24 countries have already been sued for changing their tax policies.

Countries that have already had tax policies challenged by corporations are said to include India, Romania, Mexico, Ecuador and Uganda. The groupings noted also that US oil giant ExxonMobil has taken Russia to court asking for the reimbursement of $500 million in taxes it paid on a gas project, while US agribusiness giants Cargill and Archer Daniels Midland have successfully sued Mexico for introducing a “sugar tax” on the sales of soft drinks containing high-fructose corn syrup.

“The evidence of the dangers of these investment deals continues to mount. Not only do they affect health and the environment and cost taxpayers millions in legal fees, this report shows they also affect the ability of governments to tax corporations effectively,” said the Transnational Institute’s Cecilia Olivet.

Nick Dearden, director of Global Justice Now, accused the UK government of “trying to sign us up to a trade deal that could effectively prevent us from bringing about laws that could address tax injustice.

“The ability to enact effective and fair tax systems to finance vital public services is one of the defining features of sovereignty. The fact that multinational companies would be able to challenge and undermine that under TTIP is testament to the terrifying extent of the corporate grab embedded in this toxic trade deal,” Dearden added.

Along with the two organizations contributing to the analysis, other pressure groups including Friends of the Earth and the Tax Justice Network have written to British Prime Minister David Cameron “to draw his attention to the new evidence.”

In September 2015, Cecilia Malmström, the EU’s competition commissioner provided long awaited details of a plan to revamp the controversial ISDS clause in an effort to bring the protracted negotiations forward. The dispute resolution mechanism is by far the most controversial aspect of the proposed trade deal, which has been repeatedly held up by in particular European fears that US multinational companies could use private arbitration rules to challenge European food and environmental laws.

With the German chemical industry association Verband der Chemischen Industrie one of the most vocal advocates of TTIP, European business for the most part has defended the ISDS mechanism as potentially working to the benefit of both sides.